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4. Total shareholder’s equity divided by the number of shares outstanding represents the
a. Return on equity c. Book value per share
b. Stated value per share d. Price-earnings ratio
6. Which of the following shareholder rights is most commonly enhanced in an issue of preference shares?
a. The right to vote for the board of directors.
b. The right to maintain one’s proportional interest in the entity.
c. The right to receive a full cash dividend before dividends are paid to other classes of share capital.
d. The right to vote on major corporate issues.
7. Preferences shares participate ratably with the ordinary shareholders in any profit distribution beyond the
prescribed preference rate.
a. Cumulative feature c. Callable feature
b. Participating feature d. Redeemable feature
8. Which of the following features of preference share would most likely be opposed by ordinary shareholders?
a. Convertible b. Callable c. Redeemable d. Participating
9. It is the amount which the preference shareholders normally receive upon liquidation of the entity.
a. Liquidation value c. Book value
b. Par value d. Fair value
10. Which of the following statements is true in relation to “call price” of preference share?
a. The call price is the amount paid to preference shareholders upon redemption of preference share during
the lifetime of the entity.
b. In the absence of liquidation value, the call price is considered in computing book value per share.
c. The call price is the amount paid to ordinary shareholders upon liquidation of the entity.
d. All of these statements are true
12. When the right to receive dividend is forfeited in any one year in which dividend is not declared, the preference
share is said to be
a. Cumulative b. Noncumulative c. Participating d. Nonparticipating
13. An entity has outstanding both ordinary shares and nonparticipating, noncumulative preference shares. The
liquidation value of the preference shares is equal to the par value. The book value per ordinary share is
unaffected by
a. The declaration of a share dividend on preference shares payable in preference shares when the market
price of the preference share is equal to the par value.
b. The declaration of a share dividend on ordinary shares payable in ordinary shares when the market price
of the ordinary shares is equal to the par value.
c. The payment of a previously declared cash dividend on the ordinary shares.
d. A 2-for-1 split of the ordinary shares.
19. The Retained Earnings balance of Mantua Company was P128,700 on January 1, 2018. Net income for 2018 was
P72,820. If Retained Earnings had a credit balance of P57,750 after closing entries were posted on December 31,
2018, and if additional stock of P35,750 was issued during the year, dividends declared during 2018 were
a. P106,700 c. P179,520
b. P143,770 d. P158,125
Given the information above, if Pelletier pays a P9,000 cash dividend, and if the preferred stock is
noncumulative, common stockholders will receive
a. P3,000 b. P9,000 c. P6,000 d. P4,500
21. Given the information above, if Pelletier pays a P64,000 dividend, and if the preferred stock is cumulative and two
years' dividends are in arrears, common stockholders will receive
a. P32,000 b. P52,000 c. P58,000 d. P46,000
22. Given the information above, if Pelletier pays a P64,000 dividend, and if the preferred stock is noncumulative and
the two previous years' dividends have not been paid, common stockholders will receive
a. P32,000 b. P52,000 c. P58,000 d. P46,000
23. Refer to Exhibit 12-1. Given the information above, if Pelletier pays a P108,000 dividend, and if the preferred stock is
cumulative and three years' dividends are in arrears, preferred stock will receive
a. P18,000 b. P24,000 c. P90,000 d. P84,000
24. During the year, Trenton Company purchased 3,000 shares of its P10 par common stock at P50 per share and later
sold it for P40 per share. How much did total equity change because of these treasury stock transactions?
a. P150,000 decrease b. P120,000 increase c. P30,000 decrease d. P20,000 decrease
25. Miro Company provided the following shareholders’ equity on December 31, 2018:
26. Sunset Company has an authorized share capital of 20,000 P100 par, 8% cumulative preference shares and 40,000
ordinary shares with P100 par value. The entity reported the following shareholders’ equity on December 31, 2018:
Cumulative preference share capital 1,000,000
Ordinary share capital 2,200,000
Share premium 400,000
Retained earnings 520,000
Treasury ordinary shares – 2,000 at cost (300,000)
3,820,000
Dividends preference share are in arrears for 2017 and 2018.
Required:Compute book value per preference share and per ordinary share on December 31, 2018.
27. Villa Company reported the following shareholders’ equity on December 31, 2018: